23/05/2011
NEWS STORY
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In the wake of criticism as to the use of Texas taxpayer's money being used to fund the forthcoming United States Grand Prix in Austin, a leading economist
insists the event will kick start the economy.
"Much has been publicized about the future of Formula 1 in Austin and Texas and I have been amazed by the misinformation linking state investment in the project via the Major Events Trust Fund to the reductions schools are making in their teacher ranks," writes Angelos Angelou on Statesman.com. "The comparison presents a false choice and is economically irrational.
"Let's begin by understanding that the Major Events Trust Fund is a fiscally neutral mechanism," he continues. "The fund was created by the Texas Legislature in 2003 to help attract large, well-attended events such as the Super Bowl, the NCAA Final Four basketball championships, the NBA All-Star Game and now Formula 1 racing.
"Under the legislation, the Major Events Trust Fund can provide $25 million toward hosting the Formula 1 event. None of these funds are used to build the venue itself, and the entire amount is reimbursed to the state once additional taxes generated from auto rentals, hotel stays, restaurant sales, alcoholic beverage sales and the sale of a variety of support services are realized.
"By my own firm's conservative estimates, more than $30 million in additional sales tax will be generated by the Formula 1 event alone.
"Overall, the comptroller's preliminary economic impact study completed in 2010 suggests accrued benefits to the Texas economy of just under $300 million from the Formula 1 race event. My own calculations peg the actual economic impact at well over $500 million when one considers benefits derived from the construction of the facilities and additional revenue generated from other events to be hosted year-round at this venue.
"These estimates are reinforced in past studies. According to a Financial Times-reported study in September 2008, the $275 million invested in Formula 1 races by governments around the world brought in $1.52 billion to local economies - a 533 percent rate of return per race.
"The projections for Formula 1 are very encouraging, but let's also deal in today's facts. The development of Circuit of the Americas is funded to the tune of between $250 million and $300 million by private investors without any government incentives afforded to the developers.
"Right now, private investment is putting more than 1,300 people to work readying the site and constructing the new facility. Architects, sign makers, construction workers, heavy equipment operators, engineers and office workers are all engaged in building a world-class destination for business, performance and entertainment.
"These jobs pay competitively and provide income to workers who have bills to pay, families to feed and mortgages to meet. Several hundred permanent positions will be created at the venue once it is fully operational, and for race event weekends, several thousand more people will be employed.
"Formula 1 is the premier motorsport event in the world. Texas, and specifically Austin, is lucky to recruit such a globally renowned event. It will provide considerable momentum for more sporting events to be hosted here and research and development opportunities for our colleges and universities. The publicity created will put Texas on an international stage.
"From an economist's perspective, it is clear that tools like the Major Events Trust Fund are good public policy. Investment is sparked, and much-needed revenue and taxes are generated. Construction and permanent jobs for a variety of hard-working Texans are created, and new diverse economic segments are developed.
"This is the kind of policy that grows our state's economy and provides opportunity for every industry and every profession," he concludes.
To check out our gallery showing how work is progressing in Austin, click here - while our page on YouTube features an excellent time-lapse video of construction progress at the Circuit of The Americas between March 29 and April 29.